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Investors monitor the movement of stock prices at a brokerage firm in Guangzhou, South China's Guangdong Province May 9, 2007.
Growing up in Hong Kong where stock bubbles had been relatively common since the 1970s, I saw it happen. Working in the investment industry in Canada (where the middle class presumably died a few decades ago), I saw it happen again. And again, and again:
China Daily -- Xiao Feng, a former investment consultant at a futures company in Nanjing, put his three apartments and two vehicles - worth 5 million yuan - up as collateral days ago to get a 10 million yuan loan to invest in the stock market.

But the cost of borrowing is high - with an annual interest rate of 25 percent, he'll have to pay the lender 2.5 million yuan in interest at the end of the year, reported the Nanjing Morning Post on Wednesday.

In addition, the lender will monitor his stock trading account. If the value of Xiao's portfolio drops below 8 million yuan, the lender will liquidate his stock holdings to prevent a further decrease in the principal, spelling a loss of two million for Xiao.

When the 2.5-million interest payment is also taken into account, Xiao Feng will lose what he has worked for in the past 10 years - all his collateral.

Then why take such a risk? "Maybe it is the lure of the stock market. If an investment in a stock triples, or quadruples in a short period, then why not try?" he replied.

What Xiao is doing mirrors an investment mania that is sweeping across China. The stock market has soared more than 50 percent so far this year on top of a 130 percent gain in 2006, drawing tens of thousands of investors in each day.
I remember telling clients at the top of the dot com mania that it really was different this time: the propensity to gamble would only increase going forward due to the perceived death of the middle class in North America.

Call it the Lou Dobbs, War on the Middle Class phenomenon: If a person comes to believe that the American Dream can no longer be attained through hard work and savings, then why not take big(ger) risks? Go big or go home.
Friedman and Savage (1948) offered a third solution, in the context of lotteries. "Men will and do take great risks to distinguish themselves, even when the know what the risks are," they wrote (p. 299). Perhaps people trade stocks and buy lottery tickets because these offer the only [hope] of rising from the working class to the middle or the upper class. -- "Lottery Traders", Meir Statman, 2001
Apparently my thinking is not original. :-)
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